What is the Risk of Creating For-Cause Employment Relationships?

You may recall an earlier discussion of at-will employment in the context of employee handbooks where we defined at-will employment as meaning that either the employee or employer may terminate the employment relationship at any time and for any non-discriminatory reason. In contrast, a for-cause employment relationship can only be terminated for a reason specified in an employment contract as grounds for termination.

Although employees are generally presumed to be at-will, employers should be mindful of unintentionally converting an otherwise intended at-will employment relationship to a for-cause employment relationship. This conversion can happen simply by making oral or written statements suggesting job security, permanent employment, or that a job will be available provided the employee performs their job, during the recruiting or interviewing process. The risk also exists when applying inflexible discipline policies, particularly progressive discipline policies to at-will employees. Disciplinary policies that allow for discipline only under specific circumstances or through progressively rigorous disciplinary steps may inadvertently modify at-will employment status.

Solution: Be Careful to Avoid Converting an At-Will Relationship into a For-Cause Employment Relationship.

There are certain steps an employer can take to avoid converting an at-will relationship into a for-cause employment relationship. Employers should first ensure that all employees involved in recruiting, interviewing and hiring understand the difference between at-will and for-cause employment. It is very important that managers or other individuals involved in the recruiting or interviewing process know that they are prohibited from making representations that in any way limit or modify the at-will employment relationship. Additionally, as set forth in our previous blast regarding the importance of employee handbooks, the at-will provision should inform employees that they are employed on an at-will basis and that nothing in the handbook is to be construed as creating a contract of employment. Employees should be encouraged to sign an acknowledgement page explicitly setting forth his or her at-will status at the commencement of his or her employment. Moreover, employers should decide whether disciplinary policies creating probationary periods or setting forth progressive discipline are truly necessary. If they are, employers should explicitly preserve at-will employment by including a disclaimer stating that:

• Disciplinary procedures and policies do not modify at-will employment and do no create a contract of employment; and
• The employer maintains the right to skip or modify disciplinary procedures at its discretion.

Managers should also be careful when they speak to employees about discipline. For example, managers should be mindful not to ensure or promise an employee that he or she will have a successful future at the company if they can improve their performance. Such statements can create a contract for continued employment, rather than protect your company’s right to terminate at will.

With that said, employers should always be sure to impose discipline consistently and be mindful of protected status and protected activity. Employees who commit the same misconduct or display the same performance problems should be treated in the same manner. If employers play favorites or come down harder on certain employees, employers are risking exposure to a discrimination claim by an employee who alleges that a protected characteristic, such as race or disability, played a role in the employer’s decision. Promote consistent enforcement of policies by training supervisors and managers on disciplinary practices and use consistent language to describe similar employee performance and other problems.

For assistance in drafting or reviewing your company’s disciplinary policy and/or for specific questions concerning disciplinary measures, please contact our office directly.